Fresh data released today reveals those in the UK are paying more than ever in inheritance tax just as Labour readies a wave of changes to take more of people’s life savings on their death.
Rising prices of property and other assets, including equities, mean more estates are being dragged into paying IHT with the thresholds frozen.
“Thanks to frozen nil-rate bands and asset price growth IHT receipts have been hitting record highs in recent years, soaring to £7.5bn in the 2023/24 tax year. This is set to rise in the current tax year too. Receipts from April 2024 to September 2024 are £4.3 billion, which is £0.4 billion higher than the same period last year,” said Rob Morgan, Chief Investment Analyst at Charles Stanley.
Morgan continued to explain that despite rising IHT receipts, the new Labour government is intent on transferring more of people’s wealth to the treasury when they die.
“Despite this, it seems inevitable inheritance tax (IHT) will be in the Chancellor’s Budget crosshairs given the extent of the government’s stated funding gap. With the ‘baby boomer’ accumulation of wealth increasingly being passed to the next generation inheritance tax rules are being closely examined.
“While it’s doubtful the rate of inheritance tax will be increased – it’s already at a very high at 40% – the various exemptions and gifting rules used to mitigate, and in some cases eliminate, the tax will surely fall under the microscope.”
There are also fears that Labour will target business relief on AIM shares, which allows investments in this junior market to be passed on free of IHT if held for more than two years.
The industry has lambasted the suggestion of removing this incentive to invest in some of the UK’s most exciting businesses for its sheer ignorance of the consequences for the wider economy.
AIM-listed companies create thousands of jobs and generate billions for the UK economy.
We will have to wait until 30 October to see whether the new Labour government actually values UK economic growth as it claims and leaves some excellent incentives to invest in early-stage companies untouched.